Court: Winklevoss Twins Can't Alter Facebook Deal

By IBT Staff Reporter On 04/11/11 AT 4:58 PM

A federal appeals court has ruled that former classmates of Facebook founder Mark Zuckerberg must abide by a deal they made when they fought Zuckerberg over ownership of the idea for a social networking site.

The 9th U.S. Circuit Court of Appeals said Camryn and Tyler Winklevoss were and are sophisticated enough to know what they were signing when they settled their original lawsuit in 2008. That settlement included a large cash payment of $65 million for the Winklevosses and Divya Narendra, their partner.

The lawsuit became part of the movie The Social Network, about the founding of Facebook.

In the 2008 settlement, Camryn and Tyler Winklevoss agreed to transfer the ownership of a social networking site, ConnectU, to Facebook. That agreement arose out of a dispute over who came up with the idea for the kind of social networking software Facebook uses.

The original lawsuit was filed in 2004. The Winklevosses said Mark Zuckerberg, after promising to work on their social networking site, to be called HarvardConnection (later ConnectU), had essentially stolen the idea and some of the code, and broken an oral agreement.

After the settlement the Winklevosses then said that the settlement was invalid and unenforceable because it had been obtained by fraud. Zuckerberg, the Winklevosses said, had given a lower valuation for the company than it deserved. The courts disagreed, and ruled against the Winklevosses, who then appealed. (Divya Narendra did not join the appeal).

The Winklevosses are not the first parties bested by a competitor who then seek to gain through litigation what they were unable to achieve in the marketplace, wrote Chief Judge Alex Kozinski, in the opinion handed down by the court. With the help of a team of lawyers and a financial advisor, they made a deal that appears quite favorable in light of recent market activity. At some point, litigation must come to an end. That point has now been reached.